On Jul 20, 2007, at 9:43 PM, Robert Wrubel wrote:
> As a pure amateur in financial matters, I still think
> the best explanation for rising markets was the
> observation that there's a lot of money around that
> has to be invested somewhere. In fact, this fits with
> other left views, like Harry Shutt's, that the
> underlying fact of the last three decades -- driving
> all kinds of things like privatization, globalization,
> financialization and hedge funds -- is the scarcity of
> new investment opportunities.
Profitability has been quite high in the U.S. for the last few years, but investment has been low. (I'm sure someone will counter that profitability isn't high if you perform the necessary value magic, but I don't know any capitalists who experience properly transformed profitability.) Corps have been shoveling huge amounts of cash into their shareholders' pockets through dividends, buybacks, and takeovers. Shareholders want very high rates of return, very quickly, before they'll tolerate capital expenditures in any quantity.
There's been quite a bit of investment in China and India, though, so the scarcity of investment opportunities isn't universal.
Privatization and the rest were in large part strategies to increase profitability, and they worked pretty well.
> On the other hand, I heard a NY Times financial writer
> interviewed on NPR today who said the 14,000 market is
> simply keeping even with inflation.
Not even. Adjusted for inflation, market indexes are below their earlier highs.
Doug